Social Security may seem simple enough, but there are many situations where a clearer understanding of the benefits may earn you possibly thousands extra each year. In this post, I hope to break down the most popular situations in which you may be entitled to more than you thought.
Situation 1: Single
If you have never been married and never had kids, your Social Security is somewhat simple. The biggest thing to decide is when it is best for you to start taking your monthly benefits. The earliest you can take the payments is when you turn 62. If your Full Retirement Age is 67, your benefits at 62 will be reduced by 30%. The trade off, however, will be that you get 5 additional years (60 months) of benefits. It takes about 12 years to break even between taking at 62 and 67, so if you believe you’ll live past 79 you will receive more benefits in total by waiting until your 67. Every month you wait after you turn 62, your monthly payment will go up by a fraction of a percentage until the month you turn 67. After 67, your benefits go up by 8% a year (or 0.67% for each month you wait). Your maximum benefit will be reached when you turn age 70. Similarly, if you wait until age 70, it will take about 12 years to break even. If you believe you will live past 82, waiting for the maximum monthly payment will give you the biggest benefit.
Even if you believe you can live until you’re 100, it doesn’t mean you have to wait until you’re 70. If you need the additional cash flow as soon as possible, then it may be more beneficial for you to begin as early as you can. By weighing your current cash need with your life expectancy, you can find the best time for you to begin payment.
Situation 2: Married
Did you know you could be entitled to Social Security even if you have never worked a day in your life? If you have been married, for at least 12 months, to someone qualified for Social Security, you are automatically qualified for half of their earnings at their Full Retirement Age. Now, just because you are qualified for half their earnings, it doesn’t mean you will necessarily receive the full amount. As long as your spouse has filed and is receiving benefits, you can begin collecting off them at age 62. However, if you decide to start collecting at age 62, you will receive reduced benefits. In 2021, if you file the month you turn 62, you will receive a monthly benefit of 30% less than if you file for benefits in the month you turn Full Retirement Age. This reduction will decrease each month you wait until you turn your Full Retirement Age (67 for anyone born in 1960 or later). It’s important to note that you will be qualified for the maximum amount the month you turn your Full Retirement Age. This means it is not beneficial for you to wait longer than your Full Retirement Age if your spouse is already receiving benefits.
Situation 3: Divorced
If you are divorced, there is still a way for you to collect off your ex‐spouse without it affecting their payments whatsoever. There are a few requirements in order for you to be qualified for this benefit. First, you must be at least age 62 and not re‐married. Your ex‐spouse must already be collecting their benefit and your marriage had to have lasted at least 10 years. If you pass each of these requirements, you are entitled to 50% of your ex’s Full Retirement Benefit. Similar to if you were married, those benefits are reduced by 30% if you start collecting at age 62 and will steadily increase until you reach your Full Retirement Age. You will not receive more than 50% of your ex’s Full Retirement Benefit if you wait longer than your Full Retirement Age to collect.
For both spouses and ex‐spouses, you will not receive spousal benefit if your personal Social Security is greater than 50% of their full retirement age. Social security will automatically send you the larger of the two benefits.
Situation 4: Widow/Widower
As a widow(er), you will also be entitled to benefits if your personal Social Security payments are less than your deceased spouse’s benefits. Unlike a married couple, you are entitled to 100% of your deceased spouse’s full Social Security benefit. Also unlike regular spousal benefits, you can start taking benefits as early as when you turn 60 (or 50 if you are disabled). To qualify, you must have been married at least 9 months (and married when they pass away) and you cannot re‐marry until you turn 60. If it is your ex‐spouse that is deceased, you qualify as long as you were married for 10 years and are single.
If you are the caretaker of the deceased’s child (under 16) or adult disabled child, you are entitled to 75% of their full benefit at any age.
A child is entitled to 75% of their deceased parent’s full benefit until they turn 18 (or 19 if they are still in high school).
Situation 5: Dependents
Many people don’t know that your child could receive benefits once you start receiving yours. If you are taking Social Security and have a child who is under age 18 (or 19 if they are still in high school), they are eligible to receive 50% of your Full Retirement Benefits, even if you take your benefits before Full Retirement Age. Disabled children can continue to take these benefits as long as they became disabled before age 22 and continue to be disabled.
These funds are put into a Trust under the child’s name and you are allowed to withdraw to pay for their expenses. For example, you can hold the funds in the Trust until the child goes to college and use it as their college savings.
It’s important to note that your total household benefit cannot exceed 175% of your full retirement benefit. This is only if there is one income earner and is not affected by ex‐spousal support. If you have any questions that were not addressed in this blog post, don’t hesitate to set up an appointment with me using the contact information below. Thank you for reading!
Investment Advice offered through Bickling Financial Services, Inc., a registered investment advisor. Securities offered through Purshe Kaplan Sterling Investments, Member FINRA/SIPC Headquartered at 80 State Street, Albany, NY 12207. Purshe Kaplan Sterling Investments and Bickling Financial Services are not affiliated companies.